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Amidst Loss Of 1 Million Customers, Netflix Offers Explanation; Announces Video Games, Qwikster
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Qwikster

To say people were angry when Netflix announced even more price increases in July would be an outrageous understatement, to say the least.

But instead of people just complaining and moving on like we so often tend to do, the negative reaction was matched by significant losses. Netflix shares have dropped nearly 20% so far, and the company’s previous estimation of around 25 million subscribers by the end of the third quarter has now been lowered to 24 million, meaning at least a million people have already decided to bail on the service.

Instead of just leaving things be and see how they turn out, Netflix is making some more big changes (though none to prices, no worries).

Company co–founder and CEO, Reed Hastings, wrote a lengthy blog post Sunday doing something he should have done a long time ago: explain exactly why they decided to increase prices. He also revealed plans to integrate video games into their rental options, and Qwikster, the new name of their DVD service.

Here’s Hastings’ explanation for the price increase:

Many members love our DVD service, as I do, because nearly every movie ever made is published on DVD, plus lots of TV series. We want to advertise the breadth of our incredible DVD offering so that as many people as possible know it still exists, and it is a great option for those who want the huge and comprehensive selection on DVD. DVD by mail may not last forever, but we want it to last as long as possible.

I also love our streaming service because it is integrated into my TV, and I can watch anytime I want. The benefits of our streaming service are really quite different from the benefits of DVD by mail. We feel we need to focus on rapid improvement as streaming technology and the market evolve, without having to maintain compatibility with our DVD by mail service.

So we realized that streaming and DVD by mail are becoming two quite different businesses, with very different cost structures, different benefits that need to be marketed differently, and we need to let each grow and operate independently. It’s hard for me to write this after over 10 years of mailing DVDs with pride, but we think it is necessary and best.

Qwikster was the name chosen because of the quick delivery of their DVDs. Apparently it will have its very own site soon, and those of you with DVD–only plans will now do your business there instead of at Netflix. Basically, this is the final step in separating a by–mail service that they do not think will last a very long time, and making the name Netflix all about the instant streaming service.

And as for the video games, they will be offered as an upgrade much the same as they do for Blu-rays…which is actually a pretty good idea with Gamefly really being the only other one out there that offers games.

You can read Hastings’ full blog post with much more detail about the changes at the Netflix link below.

[Source: Netflix, Reuters]

5 Comments »

  1. Blockbuster’s by mail service offers video games as well & is cheaper then qwikster, plus you can exchange the rentals in the store for free

    Comment by RobertSurcouf — September 19, 2011 @ 1:37 am

  2. Another boneheaded move. Read the full post this morning at blog.netflix.com, as well as Reed Hastings replies in the comments section. Qwikster (I already can’t remember how to spell it “correctly”) is apparently going to be run as a separate operation from the streaming side of the company. When you search for titles now, you can see if it’s available by DVD or streaming, plus your ratings appear for the title regardless of which method of delivery the content was available. After the split, you’ll need to search Netflix for a title and if it’s not available by streaming, you’ll need to do a second, separate search at Qwikster (almost spelled it wrong again!) to see if it’s available by DVD. Additionally, after you’ve viewed a movie or TV show, you need to rate it at both sites separately because the ratings won’t carry over from one to the other. This could affect your recommendations on Netflix and/or Qwikster. This only appears to be an issue if you subscribe to both services but imagine switching from one to the other at a later date? You’ll need to start from scratch with your ratings or in order to receive accurate recommendations again.
     
    Regarding games, this post is completely wrong about GameFly being the only “other one” out there for renting video games by mail. Blockbuster By Mail (or Blockbuster Total Access…whatever they call themselves now) already offers games by mail. For my monthly Blockbuster “DVD” subscription, I can return my DVD mailers in store for a free and immediate in store exchange (don’t have to wait for my next in queue DVD) or I can rent a Blu-Ray disc OR video game at *no additional charge*. I can also add either a Blu-Ray disc or video game to my Blockbuster queue (again, no additional charge) and have it mailed to my house instead of getting another movie. When I’m done with the video game, same thing. I can return the mailer in store for yet another immediate rental of a DVD, Blu-Ray or video game. Regarding the physical copies obtain from the store, those are simply dropped in the return slot and as soon as they’re scanned into the system, Blockbuster mails out the next item in my online queue (no waiting for them to be received by mail and scanned in at the distribution center before the next movie goes out).

    Comment by PAUL — September 19, 2011 @ 8:51 am

  3. Why does my comment need to be approved by a moderator?

    Comment by PAUL — September 19, 2011 @ 9:54 am

  4. I left Netflix bc of the price increase. I like to have the actual DVD or Blu-ray in hand. I feel the price increase was uncalled for to the people who still use the mail service. if having to increase cost for streaming service so be it. but do not touch the price of other services. 

    Comment by Roccojferraro — September 19, 2011 @ 2:47 pm

  5. I don’t know. I created a better thought out post earlier this morning but it disappeared into “approval by moderator” land. In a nutshell, those running Netflix have lost their minds. Qwikster (is that spelled right? Keep getting it “wrong” all day long) will be completely independent of Netflix. Want to watch a movie? Check Netflix streaming. Not available? Now you have to navigate and log in to Quikster and run a second query for the desired title. Did you like the movie? If you subscribe to both services, you have to individually submit your ratings to both websites because there is no link between the two. Decide later on that DVDs by mail just aren’t good enough and now you want streaming or vice versa? Prepare to recreate all of your ratings on the “other” side in order to bring your recommendations up to date. Two logins, two passwords, two monthly bills, two distinctly different services. Awesome! I subscribe to both Netflix and Blockbuster because, quite frankly, there are movies that one has and the other doesn’t. $50/month is too expensive though and one has to go. On the plus side, Blockbuster allows me to return the mailers “in store” for a free DVD rental. No waiting for the mailer to reach distribution before seeing another movie by DVD…it’s just there, already in hand. When I’m done with the in store rental? Drop it in the return slot at Blockbuster and as soon as it’s scanned into the computer, Blockbuster is mailing out the next title in my queue. Oh, and I don’t have to pay anything extra for Blu-Ray or video game rentals! That’s right, GameFly is not the only competitor to Netflix’s proposed online rental service. Blockbuster *already* allows it’s customers to add video game discs to their DVD queue and for no additional charge! At one point, I was sure Blockbuster would lose my business. Both raised their rates this year and with Blockbuster stores going vacant, I thought it was inevitable. Fortunately, I still have a Blockbuster store new me and they’ve been bailed out by Dish Network (for now). What a turn of events! Netflix was the surefire winner but instead, they shot themselves in both feet and are are running out of places to sit. How much longer can they stand? It was Netflix’s war to lose and they’re doing it, once announcement at a time.

    Comment by PAUL — September 19, 2011 @ 3:52 pm

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